Advisor Today - November/December 2015 - (Page 64)

back page By Brian Ashe, CLU The Price for Economic Freedom No other profession brings more public and private value to the world at so little cost than ours. "N owadays people know the price of everything and the value of nothing." So wrote author and playwright Oscar Wilde in 1891. Evidently, 124 years later, not much has changed. Financial professionals-many of whom sell both insurance and investment products-seem to be constantly under the microscope, pressured in the name of transparency to reveal how much they make on a transaction. And, even when compensation is transparent, it is automatically assumed to be conflicted, since the professional is recommending something he or she gets paid for. Little consideration is given to the fact that most professionals do what's best for their clients, because it is in the professional's best interest to form long and mutually rewarding relationships-not momentary, commoditized transactions. And, of course, gross compensation does not represent the net compensation agents receive. Declining compensation In my prior 46 years in the business, life insurance premiums (on which my compensation is based) have been reduced by 40 percent to 60 percent. This means that today, I have to sell 167 percent to 250 percent more premium just to stay even with my compensation in 1969. Renewal commissions have often been reduced by 80 percent, and service fees by approximately 67 percent. The medical loss ratio requirements of the Affordable Care Act have reduced compensation for the sale and servicing of health insurance by 20 percent to 80 percent. Yet, our responsibilities as health insurance educators have increased. We have mandatory "I can think of no more effective agent in advancing our freedom to live as we choose than the insurance salesman." -President John F. Kennedy continuing education for insurance and securities, and most companies will not hire an advisor who does not have at least a college education. At the same time, the cost of expenses-including office space and equipment, licensing fees, errors and omissions insurance, automobiles, gas, clerical assistance, parking, meals and employee benefits-have increased exponentially. Our home offices and broker dealers don't provide us with their own forms, shifting the printing and paper costs to us, and we often have to upgrade the computers and printers we use to meet new platform requirements. In 2013, the Bureau of Labor Statistics reported that the median annual income for life insurance agents was $48,210. The top 10 percent earned a median annual income of $117,830, and the bottom 10 percent earned a median annual income of $26,030. These incomes are not exactly comparable to some of the folks who regulate us. According to page 31 of FINRA's 2014 Year in Review and Annual Financial Report, the average annual compensation for the top 10 board members is $1,112,000, exclusive of any deferred compensation, with individual incomes running as high as $2,500,000. I don't doubt for a minute that these extremely bright and experienced individuals earn their keep. I just have trouble in 64 ADVISOR TODAY | November/December 2015 understanding why they think I am overpaid when I receive a portion of a 25 basis point 12b-1 fee to service my mutual fund client. Is $75 on a $50,000 account too much for me to earn for communication, record storage, correspondence, etc., between my office, client and the mutual fund company-along with all the other expenses of running my office? Can we have a reality check here? President John F. Kennedy once said, "I can think of no more effective agent in advancing our freedom to live as we choose than the insurance salesman. This man knows the economic pulse of the country as few men may, for he walks all streets of American life and he sits down and talks to youth and to the mature and to the aged. He helps them to help themselves in times of need. He builds, for he helps others to build. He insures the future. He is respected. And he is a friend." In fact, I know of no other profession that brings more public and private value to the world at so little cost than ours. And it's time for us to reinforce to clients and regulators alike that ours is a fair price for economic freedom. Brian Ashe, CLU, is president of Brian Ashe and Associates, Ltd., in Lisle, Ill., and the 2012 recipient of the John Newton Russell Memorial Award. A past president of MDRT and past chair of LIFE, he may be contacted at

Table of Contents for the Digital Edition of Advisor Today - November/December 2015

From the Editor
New Products
In Step with a Winner
Finding Success in the Chinese-American Market
Dealing with Client Confidentiality
Hashtag Your Way to Social Media Relevance
Starting the LTCI Conversation
From Term to Perm
Protecting the Downside with Allocation Adjustment
Jules Gaudreau: A NAIFA Success Story
Helping Clients Cope with Market Volatility
NAIFA Government Relations
Working with Single Women
Financial Planning FAQs of Small-Business Owners
Three Retirement Conversations to Have with Clients Today
The Advent of Robo-Advisors
Moving into the Retirement Space with 401(k) and 403(b) Plans
Moving the Sales Process Forward
Cultivating the African American Market
The Lighter Side of LIfe
Advertiser Index
Back Page

Advisor Today - November/December 2015